What You Need to Do With Your Student Loans Before the CARES Act Ends
The pause on federal student loan repayment ends May 1, 2022— Here’s what do with your student loans and how to prepare before it happens.
When the Trump Administration introduced the CARES Act in March 2020 with the provision to assist student loan borrowers, the protections were only supposed to last through September 2020.
Before wearing a mask became a normal routine..
Before hand sanitizer became something we use on the reg…
Seems like forever ago.
But fast forward through a pandemic year and the Biden Administration extended the federal protections for student loans through May 1, 2022 — but they’ve made it pretty clear that this is the last time.
So what does that mean for your federal student loans? Here are five things to keep in mind:
1. Practice making payments again and prepare your budget.
Student debt is a 1.73 trillion dollar issue (!!) — so COVID or not, and many people needed this break. Prepare yourself to start making payments again by reintroducing partial or full payments starting now and making sure they fit in your budget. Doing this ASAP will give you some time to adjust if needed.
Need a few tools to help you figure it out? Check out my favorite money apps here.
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2. Take advantage of the 0% interest while you can.
If you’re able to make an additional payment before the CARES Act expires, you should do so to take advantage of the 0% interstate’s period. This will give you more bang for your buck in the long run when it comes to paying down your student debt.
0% interest means 100% of your payment will go to your principal, so make a big a dent you can and thank yourself later!
3. Consider an Income-driven Repayment Plan.
Many people experience big changes in their income over the pandemic (before “The Great Resignation” was even a thing) that might make keeping up with payments harder than they were before COVID. If you were on a traditional repayment plan before the pandemic — like a standard, graduated, or extended payment plan — but now your payments will be too high, you might consider an income-based repayment (IDR) plan. IDR plans include Revised Pay as You Earn (REPAYE), Pay As You Earn (PAYE), Income-based Repayment (IBR) and Income-Contingent Repayment (ICR). Generally, even though these IDR plans have the potential to bring your payment down to $0 depending on your income and family size, I usually don’t recommend them because you want to get debt-free ASAP. But they are an option for those whose income has decreased during COVID and might be struggling to make ends meet.
If you’re considering an IDR plan, learn more here.
4. Get in touch with your service provider (or at try to remember who they are).
A few loan providers — most recently, NAVIENT, who had previously taken over for my arch nemesis, Sallie Mae — have bowed out of serving federal student loans. Approximately 6 billion people worth of loans, to be specific. That said, even though you wish you could forget about them, you’re still on the hook for payment regardless of notifications received (or not).
While your loan providers should be contacting you with a heads up about your payments restarting, double check that you know who is serving your loan, you’re familiar with the payment portals, etc. to avoid missing any payments.
Want to know the exact system I used to pay off over $40k in student debt in 3 years?
Check out the Money Moves Accelerator course where I teach you the exact methods and provide the tools you need to make your money work hard for you, ASAP.
5. Think twice before refinancing.
While refinancing might seem like a nice option once the 0% interest period ends, keep in mind you will lose all federal protections, including the option for federal repayment plans when refinancing with a private lender. While this may be a good option for some depending on their interest rate and payment plan (for example, if you’re on a standard 10-year repayment plan), you’ll want to make this consideration carefully. For example, if another federal protection came into play like the CARES Act, and you had refinanced with a private provider, you would likely be ineligible to take advantage of that. Keep that in mind when considering your options, as those lower interest rates can be pretty cute sometimes.
6. Scammers, we see you. There is no “Biden student loan forgiveness”.
Be on the lookout for debt scams coming your way like “Biden loan forgiveness” or payment plans requiring large upfront payments. Check with your loan provider to make sure it’s the real deal.
Want to learn more about how to avoid scams? Check this out from StudentAid.gov.
7. Update your contact info.
Moved out of a big city during the pandemic? To a tropical island? Back to your parents’ place? No biggie. Just make sure your providers are in the loop to avoid any potential missed communication. You can do this now, well in advance of May 1, 2022 to play it safe.
Still have questions or worried about your student loans? Drop a comment below or schedule your free 30-minute consultation and we’ll figure out the best plan for you, together.
For more info that’s not as fun as talking about cute interest rates, but still really important, check out StudentAid.gov.
